Test: Poverty, Planning, Finance And Economic / Social Development - 3 (2011 - 2010)


20 Questions MCQ Test UPSC Topic Wise Previous Year Questions | Test: Poverty, Planning, Finance And Economic / Social Development - 3 (2011 - 2010)


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QUESTION: 1

Why is the offering of “teaser loans’’ by commercial banks a cause of economic concern?
1. The teaser loans are considered to be an aspect of sub-prime lending and banks may be exposed to the risk of defaulters in future.
2. In India, the teaser loans are mostly given to inexperienced entrepreneurs to set up manufacturing or export units.

Which of the statements given above is/are correct?

[2011]

Solution:

The statement 1 is correct because it includes the definition of teaser loans but the statement (2) is not correct, because in India teaser loan is provided to the home buyers not setting up manufacturing or export units.

QUESTION: 2

What is the difference between “vote-on -account” and “interim budget”?
1. The provision of a “vote-on-account’’ is used by a regular Government, while an “interim budget’’ is a provision used by a caretaker Government
2. A “vote-on-account’’ only deals with the expenditure in Government budget, while an “interim budget’’ includes both expenditure and receipts

Which of the statements given above is/are correct?

[2011]

Solution:

Statement 1 is not correct as caretaker Government is the government which is ready to Go, it does not present the Interim Budget. The Interim Budget is presented by the Incoming Government or new Government which has different fiscal and revenue plans from the outgoing Government.

QUESTION: 3

With reference to the Finance Commission of India, which of the following statements is correct?

[2011]

Solution:

The Commission shall make recommendations as to the following matters, namely:
(i) The distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them under Chapter I Part XII of the Constitution and the allocation between the States of the respective shares of such proceeds;
(ii) The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India and the sums to be paid to the States which are in need of assistance by way of grants-in-aid of their revenues under article 275 of the Constitution for purposes other than those specified in the provisions to clause (1) of that article; and
(iii) The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State.

QUESTION: 4

Among the following who are eligible to benefit from the “Mahatma Gandhi National Rural Employment Guarantee Act”?

[2011]

Solution:

All adult members of the household who registered can apply for work. To register, they have to: Be local residents

QUESTION: 5

Microfinance is the provision of financial services to people of low-income groups. This includes both the consumers and the self-employed. The service/services rendered under microfinance is/are :
1. Credit facilities
2. Savings facilities
3. Insurance facilities
4. Fund Transfer facilities

Select the correct answer using the codes given below the lists?

[2011]

Solution:

Microfinance is a movement whose object is "a world in which as many poor and near-poor households as possible have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and fund transfers."

QUESTION: 6

With reference to “Aam Admi Bima Yojana’’, consider the following statements?
1. The member insured under the scheme must be the head of the family or an earning member of the family in a rural landless house-hold.
2. The member insured must be in the age group of 30 to 65 years.
3. There is a provision for free scholarship for up to two children of the insured who are studying between classes 9 and 12.

Which of the statements given above is/are correct?

[2011]

Solution:

The statements 1st and 3rd are correct, but 2nd statement is wrong because, the member should be aged between 18 and 59 years not 30 and 65 years.

QUESTION: 7

Both Foreign Direct Investment (FDI) an d Foreign Institutional Investor (FII) are related to investment in a country. Which one of the following statements best represents an important difference between the two?

[2011]

Solution:

Foreign Direct Investment only targets a specific enterprise. It aims to increase the enterprises capacity or productivity or change its management control. The FII investment flows only into the secondary market. It helps in increasing capital availability in general rather than enhancing the capital of a specific enterprise. The Foreign Direct Investment is considered to be more stable than Foreign Institutional Investor. FDI not only brings in capital but also helps in good governance practises and better management skills and even technology transfer.

QUESTION: 8

Consider the following actions which the government can take:
1. Devaluing the domestic currency.
2. Reduction in the export subsidy.
3. Adopting suitable policies which attract greater FDI and more funds from FIIs.

Which of the above action/actions can help in reducing the current account deficit?

[2011]

Solution:

Current Account deficit is excess of Exports over imports. After devaluation of domestic currency, domestic goods would become cheaper which will create additional demand for countries products in the world markets.
Rising capital Inflow through FDI and FII may appreciate the domestic currency and can worsen a country’s current account by increasing more imports and reducing exports, FDI and FII represents non-debt liabilities.

QUESTION: 9

Which one of the following statements appropriately describes the “fiscal stimulus”?

[2011]

Solution:

Governments use fiscal policy to influence the level of aggregate demand in the economy. It is an effort to achieve economic objectives of price stability, full employment, and economic growth

QUESTION: 10

In terms of economy, the visit by foreign nationals to witness the XIX commonwealth games in India amounted to

[2011]

Solution:

Income from “tourism” is an invisible export and brings foreign exchange in the country.

QUESTION: 11

India has experienced persistent and high food inflation in the recent past. What could be the reasons?
1. Due to a gradual switch over to the cultivation of commercial crops, the area under the cultivation of food grains has steadily decreased in the last five years by about 30%.
2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a significant change.
3. The food supply chain has structural constraints.

Which of the statements given above are correct?

[2011]

Solution:

Notwithstanding some moderation, food price inflation has remained persistently elevated for over a year now, reflecting in part the structural demand-supply mismatches in several commodities. The trend of food inflation was pointing at not only structural demand-supply mismatches in commodities comprises the essential consumption basket but also at changing consumption patterns.

QUESTION: 12

Consider the following statements:
In India, taxes on transactions in Stock Exchanges and Futures Markets are
1. levied by the Union
2. collected by the States

Which of the statements given above is/are correct?

[2010]

Solution:

In India taxes on transactions in Stock Exchange and Future Markets are levied and collected by the Union Govt.

QUESTION: 13

Which one of the following authorities makes recommendation to the Governor of a State as to the principles for determining the taxes and duties which may be appropriated by the Panchayats in that particular State?

[2010]

Solution:

State Finace Commission governs the distribution between the State and the Panchayats of the net proceeds of the taxes, duties, tolls and fees leviable by the State, which may be divided between them under this Part and the allocation between the Panchayats at all levels of their respective shares of such proceeds; the determination of the taxes, duties, tolls and fees which may be assigned as, or appropriated by, the Panchayats; the grants-in-aid to the Panchayats from the Consolidated Fund of the State.

QUESTION: 14

In India, the tax proceeds of which one of the following as a percentage of gross tax revenue has significantly declined in the last five years?

[2010]

Solution:

The excise duty’s share in the total tax revenue, which was 41.3 percent in 1992-93, declined to 25.1 percent in 2006-07. The customs duty’s share in the total tax revenue, which was 31.9 percent in 1992-93, fell to 17.5 percent in 2006-07, as a result of massive structuring on excise and customs.

QUESTION: 15

With reference to the National Investment Fund to which the disinvestment proceeds are routed, consider the following statements:
1. The assets in the National Investment Fund are managed by the Union Ministry of Finance.
2. The National Investment Fund is to be maintained within the Consolidated Fund of India.
3. Certain Asset Management companies are appointed as the fund managers.
4. A certain proportion of annual income is used for financing select social sectors.

Which of the statements given above is/are correct?

[2010]

Solution:

On 27 January 2005, the Government had decided to constitute a ‘National Investment Fund’ (NIF) into which realization from sale of minority shareholding of the Government in CPSEs would be channelised. This fund is managed by professionals and a part of it is used for use in social sector – like education, health care and employment.

QUESTION: 16

In the context of India’s Five Year Plans, a shift in the pattern of industrialization, with lower emphasis on heavy industries and more on infrastructure begins in

[2010]

Solution:

It was during eighth plan period (1992-97) that emphasis was put on infrastructure development.

QUESTION: 17

Consider the following actions by the Government:
1. Cutting the tax rates
2. Increasing the government spending
3. Abolishing the subsidies in the context of economic recession

Which of the above actions can be considered a part of the “fiscal stimulus” package?

[2010]

Solution:

Abolishing the subsidies will lead to higher prices of goods and services which are subsidzed. A reduction in the tax rate would be a stimulus. While increase in government expenditure would increase the level of demand in the economy.

QUESTION: 18

Which one of the following is responsible for the preparation and presentation of Union Budget to the Parliament?

[2010]

Solution:

The DEA or the Department of Economic Affairs is responsible for preparation and presentation to the Parliament of Central Budget and the Budgets for the State Governments under President’s Rule and Union Territory Administration.

QUESTION: 19

Who of the following shall cause every recommendation made by the finance Commission to be laid before each House of Parliament?

[2010]

Solution:

As per provisions given under Article 281 of the Indian Constitution the recommendations of the finance commission go to the president who is constitutionally bound to place it before the two houses of the parliament.

QUESTION: 20

Inclusive growth as enunciated in the Eleventh Five Year Plan does not include one of the following:

[2010]

Solution:

Inclusive growth is ‘broad-based growth ’, ‘shared growth’, and ‘pro-poor growth’. It excludes the capital markets which is left to operate by itself in the open market.